Trading Systems: Money Management

By Maclin Vestor

How to manage money when buying stocks, futures, or options -- what you must know before you buy.

Many people have a very crucial problem, they take on more risk than they can. It really doesn't matter if you're very young, if you take risk to the extreme and continue down that path, you will by mathematical law in all probability lose money.

Lets say you had an almost sure investment that was 85% likely to succeed. When it succeeded you double your money. You put all your money on it. The problem is, when the investment fails, you lose everything. Now it is just a fact that you will eventually lose everything if you continue to invest everything. You only need one trade and you are wiped out completely. Now, even if you invested 90% of your money on an investment that would win 80% of the time, you still are taking on too much risk to win in the long run. If you lose once, you will need a 1000% return just to get back to even. That simply will not happen forever, and even if it did, the large loss would limit your potential for gain so much, that you'd be better off not taking on the maximum risk.

Now, your risk of losing everything can never be completely 100% eliminated, even with conservative strategies. If you flip enough coins, eventually you'll get a very rare event such as 100 heads in a row. However, you'll also get 100 tails in a row. The idea is that you have a strategy that yields you more when you win, and/or wins more than it loses. in this case there will be several losses in a row, but there will also be several wins in a row. If you manage your money properly, you will still have enough money if you get several losses in a row, to be able to more than make up for it when you get several wins in a row. If you are forced to limit the amount of capital after so many losses, that you cannot invest with the same amount after the losses, you may be unable to win enough to make up for those losses. The idea is to keep your investments small enough to limit the chances of that happening. Although almost nothing is a sure thing, by using proper money management, you tip the odds in your favor.

Even if you have a profitable method, if you do not manage your risk, your profitable method becomes unprofitable. It's not usually the investment vehicle, it's the investor that ultimately determines how quickly you fail, and ultimately whether you are able to succeed. Under the same context, it's not usually the type of car, but the driver that determines whether you cause an accident. In order to protect yourself, you must keep your positions at a manageable level, and make sure to keep yourself limited by these rules that will limit your risk of ruin and keep the odds in your favor so you can stay in the game.

So how exactly does one manage money in a trading system? You need to determine probability of a move taking place. If you buy OTM option, the stock will have to move larger for success to occur. Of course if it does, the reward will be greater. There are probability curves based on a random walk theory that will assist you in determining the probability of a move taking place, until you know any better, use these. However, you also should use your own records of your system Determine both your risk/reward (your average % win divided by your average percentage losses, and in addition figure out your likelihood of success. When you do this, you can use what's known as the Kelly Criterion By using the formula as follows Kelly % = W - [(1 - W) / R] Kelly % = The maximum percentage of your capital you should invest per position. W = Winning probability R = Win/loss ratio

A trading system that contains good money management rules will not only outperform one without, but it will also help protect your capital, and keep you in the game. - 23221

About the Author:

Maclin Vestor teaches about various automated trading systems and teaches you to find a stock market trading system that works for you.

Selecting A Forex Trading System

By Bart Icles

The foreign exchange market grows more and more attractive as each trading passes. Investors are not only attracted by the sizeable profits that it can offer, they also want to know if they can really cope with the changing trends of the market. To achieve a more manageable trading experience, investors - both beginners and seasoned traders alike - use forex trading systems. It can be tricky to select a forex trading system that would best suit your needs so it is important to take note of some basics.

In the forex world, investors cannot simply tell what lies ahead of them and those who do not do something about this end up losing money and they eventually give up on forex trading. However, a wise investor would not totally give up on trading if he or she loses money. Instead, a wise investor would just take a step back and review the situation at hand and then go back to trading again. In a situation such as this, it helps to have a forex trading system that can help you get off on the right foot. Doing so, you will be able to save some money for yourself and hopefully become the next most profitable forex trader.

Different kinds of forex trading systems are available and they are based on the different kinds of traders that exist in the forex world. There are three types of forex traders in the currency market. The short term trader, also known as the scalper, likes to open and close a trade in just a matter of minutes. This type of trader takes advantage of the smaller movements in forex rates and large amounts of leverage. The long term trader looks forward to holding positions for months and months on end, and sometimes even years by making decisions based on long-term factors. In between these two are the medium term traders who hold positions for a couple of days by taking advantage of technical situations that appear to be more opportunistic.

To determine which forex trading system would best work for you, it helps to know what kind of trader you would want to become. Short term traders can lose large amounts of capital in just a matter of minutes but they are also able to realize profits faster. Medium term traders can safely hold their positions but they can easily miss out on big opportunities. Long term investors reap in the largest amounts of profit but they also require large investments to cover losses brought about by unpredictable movements.

In choosing a forex trading system, choose one that can be adjusted to your trading personality and your needs. Do not choose a system based on the needs of other traders because this simply will not help. Choose one that will allow you to be more creative on your side of the market, one that can help you achieve your goals in your forex career. - 23221

About the Author:

Good forex courses starts with a desire to learn and a drive to become a great trader. Learning with forex trading courses takes dedication and a good teacher. But once you learn how to trade and do so successfully your life will change and you have options and financial resources you never had before.

Do You Have The Forex Traders Mindset? (Part I)

By Ahmad Hassam

Human beings are emotional creatures. It is often said that we are our own worst enemy. In forex trading, this is the ultimate truth. Most of our trading decisions are guided more by emotional than logical thinking. Our mind is capable of playing emotional tricks on us.

We can get seduced into unfavorable situations by our emotions. Emotions can work for us and against us. Your battles are won or lost in your mind first. A traders mindset is the most important ingredient of success.

Forex trading is not for everyone. Do you have a strong desire to succeed in forex trading? You will end up like the majority who end up losing their money if you just want to try your luck or dabble in trading. Do you have the passion for trading forex?

In order to become a successful forex trader, you must be highly self motivated. You must have a concrete plan of action and not be afraid of failure. Are you ready to devote a lot of time and effort into picking up trading skills and knowledge?

You cannot succeed without knowledge and skills. If you want to succeed at anything, you should immerse yourself in that thing. Learn every nitty gritty. This is the only way to succeed. So you need knowledge and skills in trading currencies in order to become a successful forex trader. To attain consistent success in forex trading, a huge amount of time, effort and money is required for a trader.

Are you willing to accept losses as part of trading? You are going to make mistakes while trading. Do you understand that you can suffer losses in trading? Are you willing to learn from your mistakes? Do you have a traders log that you use to reflect on each lost trade and learn from it?

Most of the new traders read some market analysis from an analyst. They enter into the trade based on that market analysis. Most of us tend to blame the market analysis and the opinion of the analyst if the trade turns out to be a loser. It is easy to blame others.

Dont be trigger happy? Only pull the trigger when you are confident that you have done your analysis to confirm what others are saying. Is it fair to blame someone when you could have done further market analysis on your own? When you could have planned your trade in a better way, it is foolish to blame others for your mistakes.

Fear and greed are two demons that are going to haunt you in every trade. Fear and greed are the two most important and dominant emotions that affect not only the individual traders but also the currency markets. A trader is constantly under the influence of fear and greed when trading. Can you be greedy when others are fearful? Do you need to be fearful when others are greedy? In fact, these two emotions are the main drivers of the forex markets.

Greed is going to make you over optimistic in thinking that a currency is going to appreciate. Similarly fear makes you over pessimistic about a currency pair. All in all, fear and greed are behind the steering wheel of the currency market. - 23221

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Know Swing Trading. Learn Forex Trading!

How to Qualify for an Investor Visa

By Sam McDougall Turner

Relocation to the United States of America can be a very difficult process. However there are several ways that you can vastly improve your chances of being granted a visa. One of the most common of these is to opt for an investor visa. There are two basis types, temporary and permanent.

The temporary investor visa is called the E-2.

The E-2 visa is popularly known as the Temporary Green Card. The reason for this is that there is no upper limit to the visa term and therefore extensions to your stay and visa renewals can be granted on a limitless number of occasions, provided that the qualifying investment is still in existence and all other conditions for the E-2 visa are still being satisfied.

This visa allows foreigners who have made substantial investments in the United States to relocate to the United States in order to develop and direct the business operation established by their investments.

You may be eligible for this visa if you are the investor, or if you are an executive, manager or essential employee of the foreign company that made the investment and you and the major shareholders of the company are the nationals of a country that has an ongoing Treaty of Trade, Friendship and Commerce with the United States.

In the case of executives and corporate personnel, only nationals from the same country as the corporation are eligible. You will have to show that an investment in the United States has already been made, or that your company is actively in the process of investing. Therefore if you possess significant financial assets, the E-2 visa may be for you.

The E-2 visa may be suitable for those who wish to invest a significant sum of money in order to either purchase an existing business or to set up a new business. The E-2 visa is not suitable for silent investors as the investor is required to play an active role in the management and direction of the investment enterprise.

Investing in a US company and qualifying for a visa is a notoriously complex task, it is therefore strongly advisable to seek professional, competent legal advice on the criteria you must meet in order to qualify before making the investment. - 23221

About the Author:

When you have decided to invest in a US business, our law firm will be able to assist you in the legal process of applying for the E-2 investor visa. Please visit www.visas4america.com for advice on applying for an investor visa.

Three Tips to Boost Your Profits from Attending Marketing Seminars

By Ben Moskel

Will you be attending one of the many live seminars or conventions this year? Are you worried that you may not squeeze as much value out of the event as compared to the ticket price?

Live conventions are a significant investment of your time, money, and resources. With the three tips below you will be sure to make the best of your investment.

First, come with questions and goals written down. Each year I attend several events and spend tens of thousands of dollars on my marketing education. During the weeks leading up to the event I keep a notebook at my work station and jot down any questions or really specific things I want answered at the upcoming seminar. Perhaps you have a question about how to use Google's Website Optimizer tool. Maybe there is a colleague you want to meet in person.

It is so easy to get distracted at a seminar and completely ignore the reasons you bought your ticket in the first place. That is why having the notebook handy will help remind you about your questions and goals.

The most important tip is to make sure you are assertive especially if you consider yourself to be a shy person. Many times you may find yourself intimidated by the so called experts or gurus in the crowd. Resist the urge to hole up alone in your hotel room. Keep in mind that others also feel apprehensive about meeting new people and making conversion. I guarantee you will get infinitely more value from these rare networking opportunities than if you keep to yourself.

Remember also that these events are rare. Often an event is only held once per year. When will you have personal access to these types of high level entrepreneurs outside of these events?

Even if it means you meet just one person of value. That just a single contact can help you add thousands of dollars in profits or many hours of friendship for years to come.

Third, implement, implement, implement! It is tempting to form a habit of attending seminars because it makes you feel like you are working and adding value to your business. However, if you are only taking notes, but nothing more, you may as well stay at home! These same people often get home and immediately begin looking for the next event rather than execute the highly value creating techniques they discover at the last seminar.

I call the lack of execution "seminar intoxication." While you are at the event you have grand ideas of executing all of the ideas you learned. However, once you get back home with all of the typical distractions and the seminar "buzz" has worn off, it is difficult to execute these same ideas.

The one way to combat this destructive cycle is to execute one small idea at a time. Begin with just one idea, execute and then move on to the more advanced processes. Most of the marketing principles are time tested so they will be applicable even if not executed right away. You may also consider getting some inexpensive labor to help execute some of the techniques. This is especially true for highly technical type tasks or any activity you either dislike are are not proficient. Finally, keep in mind that you simply won't do everything on the list. Accept this and focus on the most important value adding tasks.

The idea is to be honest with yourself. If you know you are not ever going to teach yourself complicated php programming, but need it to implement a new strategy, then find somebody who will do it for you. Consider posting the project on outsourcing boards like elance or hiremymom.com.

If you find yourself investing hundreds of dollars, plus time energy and resources to attend seminars but do not get your money's worth, then apply these tips and you will certainly see a more profitable return on your seminar investment. - 23221

About the Author:

Ben Moskel is the author of The Online Entrepreneur available at Amazon and Barnes & Noble. Ben Moskel is a full time Internet Entrepreneur and consultant. Ben has generated several million dollars in online revenue for many large retailers and service providers.